Rapid European Banks Bailouts Another US Bank Goes Under As Financial Crisis Further Spreads

European governments had to step in with a flurry of major bank bailouts from Iceland to Germany as fear and turmoil from the U.S. credit crisis spread through the financial system.

Even as U.S. lawmakers were preparing to vote on a massive $700 billion (€490 billion) rescue of their own banks, [$US700b Bailout Deal Voted Down] the governments of Belgium, the Netherlands and Luxembourg took partial control late Sunday of struggling bank Fortis NV, while Britain seized control of mortgage lender Bradford & Bingley early today.

The rapid-fire European bailouts were quickly followed by news that U.S. financial giant Citigroup Inc. was acquring the banking operations of troubled Wachovia Corp., the latest U.S. financial institution to fail or be sold. Citigroup will absorb losses of up to $42 billion in a government-facilitated takeover.

European shares fell heavily and money markets remained frozen with banks refusing to lend to each other for all but the shortest periods.

“All banks are having difficulty with long term loans and short term financing. It’s difficult to say which could be affected,” said UniCredit economist Alexander Koch in Munich. “Despite the rescue packages in the U.S. (and Europe) that doesn’t fully correct the problem. I see the problem flowing until late next year,” he added.

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